Nam Tai Electronics, Inc. (NTE), Encore Wire Corporation (WIRE): Are These Electronics Stocks Shorted Out?

Acuity Brands, Inc. (NYSE:AYI) is all about lighting. Turning 5.8% profits on $1.9 billion in 2012 revenue, it’s not bad at all at about staying afloat, recession or recovery. At a $2.9 billion market cap, it’s almost unfair to put Acuity in the same league as the other two companies I’ve mentioned. But I need to point out some of the major differences that make Acuity a better potential buy than Encore or Nam Tai.

1. Presence

The other two companies don’t even have Wikipedia entries. Putting their names into search engines requires some hunting to find the company home pages. Acuity, on the other hand, is a lot easier to find information on. It’s hard to trade well on a public market if the public barely knows you exist.

2. Branding

On top of that, Acuity also has a lot of well-known brands in the lighting industry like Acculamp, Sunoptics, and Peerless. Being known generally means being purchased.

3. Controlled focus

Nobody’s saying Encore isn’t all about wire. But sometimes it’s okay to spread out slightly and expand your business the way Acuity did with specialty chemicals. I rather wish I’d had shares of Acuity back in 2007 when they spun off that chemical business, Zep.

The only issue I have with Acuity Brands is that it’s pricey. Brands usually carry something of a surcharge for their perceived safety, but in this case I think it’s a bit steep. Trading at 26 times earnings and more than 3 times book value, I want better profit margins (at least in the 10-20% range) and either a larger dividend or a commitment to sturdy growth. If the profits go up or the price goes down, I like Acuity. But for right now, it’s just one of three that won’t help your portfolio too much.

The article Are These Electronics Stocks Shorted Out? originally appeared on Fool.com and is written by Chris Hodge.

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